tv Fast Money CNBC October 20, 2017 5:00pm-5:30pm EDT
>> it was weird, like a halfway house, which is why it was so traumatic. >> if you had quotes delayed two hours or three hours, the market is going to melt down. that's less likely to happen now. >> we appreciate it. thank you very much. i will see you next friday that does it for "closing bell." "fast money" starts right now. "fast money" starts right now. you hear the music and you know what that means stocks are at all time highs america is getting rich. the dow, s&p and nasdaq hitting fresh records. the dollar also surging and the yield on the ten-year also rising as traders dumped bonds after d.c. takes its first steps on the path to making tax reform a reality with the senate passing a budget and wall street is loving it do you just keep buying on tax reform hopes
what is the best tax cut trade timothy. >> why would you keep buying on tax cut hopes? you've been waiting on tax hopes multiple times and you've had multiple false starts. i actually think the market has priced in tax cuts look at small caps, after mid-august, started trickling in in the month of september, the hurricanes >> iwm gap is higher to me that says this tax thing isn't priced in yet. all of a sudden we have new information out there. i think you buy the small cap stocks >> very interesting to hear you bullish on the economy that's fair. ultimately i don't know that any idea what a tax cut really means in terms of condition assumption trends for the consumer which by the way have already gotten better to be clear that this is a sudden panacea to the market -- >> it is a huge tailwind for the market the market has been looking forward to tax cuts.
every time those hopes dampen, the market sells off >> and the selloff is small. let's be clear about this. we're talking about a selloff, we're not talking about a selloff in the hit for cstoricae >> we haven't seen a selloff in quite some time. >> 15 years? >> it's because of pro growth policies, slower regulation, lower taxes. you have to keep buying the market on tax hopes. >> to tim's point, it's not a sudden pan panacea it's keeping the fundamental investor in the market there's a massive hate factor for the president, let's be clear about that we hear a lot of controversy about that on this show. the reality is there is an underinvested portion of the community right now. >> are you talking about hate
factor, money on the sidelines because they're reluctant to buy? >> that makes no sense to me on multiple levels. >> you cannot say everybody hates the president. >> you're missing the point. >> bottom line is if you think that the president's policies are anything but putting a headwind on growth or heavy regulatory, many of the things that voted him into office are the reasons the market is rallying you remove the bulls off the back of banks. you've got ceos who finally say i am about ready to invest -- >> i think we're on the same when it comes to that. let's button this up >> there is 100% underinvested portion of this market there are people on the sidelines waiting for some sort of signal that tax reform is abc going to take place. until then they're sitting back waiting. >> is there a smarter or bad
move >> a bad move, in my opinion >> you are correct, right, there's a lot of animosity towards the president. but towards the policies, though, these are -- to tim's point, these are -- >> the professional trader -- >> you're missing the point. >> i'm just addressing what you said maybe if you want to restate it. >> go ahead. >> taxes right now are not priced into the market they are starting to get discounted because the market has given it a free pass to the first quarter of '18 now if you're an investor you sit back and say, what is the risk involved with me not being invested those are the people who are going to start to move money in. that is the big -- >> then i agree with your premise. i had said that you have to continue to buy this market based on tax reform because it's not done yet >> right now >> it's still a tailwind these are pro growth policies. >> you're saying you have to be on the train you're saying we've got to be on the train. and you're saying what >> let me at least have some
semblance of prudence while i ride the train we're at a place here -- >> you're on the train >> small caps have rallied 12% >> are you on the train or -- [ simultaneous speakers >> the woman in charge asked me a question >> what are you buying >> financials. >> if i look at banks on a valuation perspective, and guys that benefit either in a rising rate environment or in an environment where we get fiscal policy that could stimulate growth in the loan sector, so banks look cheap if i'm buying banks, i'm buying european financials. ecb meets next week and i think rates are going higher in europe first. >> i'm buying small caps i wouldn't be buying the ecb, european banks, because look at what the dollar did today. with tax reform we'll potentially get the repatriation that's going to suck dollars out of the european banking system and make the european banks less
attractive an investment i want to be domestic, i want to be in small caps i'm okay with tim buying domestic but i just don't feel good about him buying the european ones. >> do you want to address that, guy? >> european banks are more hamstrung than any institutions in the world by a zero interest rate policy or negative rates in europe in a big, bad way in fact the repatriation of dollars, you act as if foreign exchange markets aren't efficient mechanisms look, the euro -- >> i'll tell you what. you haven't seen a dollar rally yet. >> if the ecb starts raising rates, the europe reuro is goin to go to the moon. >> you're talking about trillions of dollars of money flow you're already seeing a shortage take a look at the libor you're seeing a shortage -- >> hold on a second, brian the reason there's so much money in the u.s. now is because rates in europe aren't doing anything. you've got european investors all in our bond market, artificially -- >> great
okay so they're going to come more. >> even in small caps. >> you're getting this money coming out of the european banks, they'll have less of a deposit banks. it's that simple >> the reason why the dollar is increasing in dollar, the reason the ten-year yields are going higher, it's because everyone thinks because donald trump is going to pick someone who is hawkish. i don't care if he picks literally a hawk and sits him or her down in that office, he's telling them he wants low rates. the dollar will reverse. >> on that premise, what do you buy? >> i would buy a large cap we're basing this premise on tax reform, not on rising rates. i would buy large cap tech, because of that money coming back >> isn't that what we saw in the market as being the same >> today, the market was overlapping because both those stories broke at the same time but i think that buying banks now and buying things that are rate sensitive is a big mistake. i don't think that rates are going higher, even though the world thinks they're going higher >> i stick with the banks. the financials have done well.
i'll stick with the jpmorgans of the world. boeing will continue to execute the cash flow generation, their ability to continue to raise earnings in my opinion is a great thing. i would stick with boeing. >> aside from small caps >> listen, i'll go to financials i think that's not so bad. take a look at jpmorgan, goldman sachs. those look like great places in this environment >> the reason why small caps ran a large component of it were energy companies in the last couple of months because of the rise in oil which i do believe is going to reverse. if you believe that's going to reverse, the iwms will go much lower from here. >> if you look at earnings revisions, you're not getting anything close to what is represented by the move higher in prices on the expectations. that's one i think if you look at what happened to consumer stocks today and you look at consumption, if tax cuts will really take hold, let's face it, this is a consumption story. again, this is easier policy along with some expectation of last night's -- >> anybody buy tech on tax
reform hopes, repatriation >> yeah, i'm long tech i would continue to buy tech because -- everyone thinks of it as the last thing in tax reform. everyone thinks of iwm >> the problem you have -- >> coming back, all that money coming back from overseas, is a huge -- >> yes, but at the same time, if you get a stronger dollar, tech will be the one that has the headwind on that to me it's not the best trade on tax reform coming up, general electric making a stunning come back after what was described as a horrible and unacceptable quarter. what did he tell cnbc that had investors so excited plus apple opening its flagship retail story in chicago. tim cook just made an appearance we'll hear what he had to say. and next week is the busiest week for earnings. one sleeper name is poised for a brkor eaut much more "fast money" straight ahead. always obvious. sometimes they just drop in.
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morgan brennan is back at headquarters with all the details. hi, morgan >> reporter: hay, melissa. it was a trifecta of bad news for ge most stunningly, a huge cut to 2017 operating cash flow ge had previously forecast 12 to $14 billion for 2017 today, the company cut that in half >> the cash flow for 2017 is horrible $7 billion number, it's way off of our expectations. anyone's expectations. that is not -- that's not the new normal $7 billion is not the new normal there are a number of steps we're going to take to improve that significantly in 2018 and beyond >> reporter: on the call, management said there will be more restructuring costs this year and doubling next year's cost cutting target to $2 million. but there may not be enough cash coming in to cover the dividend. currently, there isn't today flannery wouldn't commit
to keeping it as is. >> we've talked about the dividend already from a philosophy perspective, we've managed for total shareholder returns. there will be a mix of capital that goes into dividend, a mix that goes into organic and inorganic investment the final completion of our analysis of everything going on in the company, we'll present that in november to the investors. >> reporter: that's going to be presented specifically on november 13th. that investor update will also include some details on the $20 billion in additional assets that he's now hoping to shed as well and melissa, it is pretty incredible to hear flannery talk about restructuring and more divestitures, because more than 65% of the revenue the last ceo inherited when he took the helm in 2001 has already been divested and yet as we've seen, it still hasn't been enough for the dow's oldest stock to stage a turnaround in fact shares are down more than 25% this year back over to you >> thank you, morgan brennan
back at headquarters clearly the street liked what flannery had to say given that massive reversal we want to give the ceo a grade, a through f, no grade inflation here how did he do the first time at the helm >> i'll give him a b you can't give him anything more i'm not sure you can give him much less. >> what was lacking? >> when you start talking about the philosophy of your approach to a dividend and a dividend cut, you're basically saying we're not telling you or we're certainly going to leave our options off to cut it. that's not a reason to give him a bad gray we're asking him whether he's doing things differently than previous management. right now previous management to this point, based upon that free cash flow which was basically zero and margins cut in half, this is a company that makes you say i'm not sure they were telling us anything that was accurate >> your grade? >> same thing, i give him a b.
he came off in an honest interview. in my opinion there's no growth to this company. zero growth, cost cutting is his only weapon. i don't think it's going to be enough >> are you grading the stock or the guy? >> i'm giving him a b because he came out with an honest effort >> how would you know? >> he was being relatively transparent. >> how can you give him a b if there's no effects at this point? >> what specifics can he give? >> you don't know anything all the questions, if i turn it back to you and say what questions do you have if you're going to be a buyer in ge stock -- >> what happens to the dividend? >> do you know what happened to the dividend right now >> what he said was, i'm not -- [ simultaneous speaking >> you're grading the company, not the ceo. >> let's go back to grading the ceo. >> okay. >> for bk it's two thumbs up i think he did a great job i'll give him an a i'm grading the ceo here
i'm grading the ceo. i did like his tie, i thought it was 100% rayon i like what he said here contrast it to what oscar munoz did yesterday with united airlines, right? he started and the stock tanked. this guy started talking and it goes green >> two totally different things. >> what's your grade >> a c because we know nothing about it he didn't tell me anything granted the stock price jumped because you have people placing bets saying, i'm not going to get a 12 print i'm not going to get a 20 print. [ simultaneous speaking >> you said he's effectively cutting -- >> yeah. just say it. >> okay. rip off the band-aid stop with the kid gloves i don't need it. >> i don't know if he had kid gloves today >> you need a billion to fund pensions, you need 8 billion to
fund dividends >> we know that now. >> given your c, given your a, would either of you buy the box? >> yes >> against the 21 stop, which is what i said last night nothing to do with what the ceo spoke about, because he could have got up there, bk says i give him an a -- [ simultaneous speaking >> in a television interview does he have the power to say we're going to cut the dividend? he doesn't have the power to do that he needs to get board approval and go through the proper channels for him to come out and have that conversation, yes, we're taking the dividend down, he just can't come out and say that like you said, bk, he guided to that a little bit. he was hedging his bets, which i 100% understand. i think he did a b job he said everything he could say. >> would you buy it? >> no, because i think it's going lower. >> i bought the stock ten days
ago. the reason i bought the stock is first of all we've already priced down earnings to a buck 50 a share i think you drop earnings by 25%. obviously expectations now are incredibly low in fact the expectations are that this company is not going to pay a dividend. and yet somehow the stock reversed majorly i think you get to a place where the sum of the parts has to add up to something even if conglomerates trade it at a discount this is a company with more questions than answers to tell me a $20 billion company with technology and assets like any other blue chip company out there and say it's not a known here >> mr. grade a >> mr. gray day. >> is ge's nightmare over? >> good price action is always a buy for me >> mr. technical, this chart today would tellitulation there.
>> it's what i said yesterday, people were floating around that number as far as if the dividend gets cut so you know your downside risk, the thing gets below 21, exit it. you could play against that now at $23.87. >> i feel like you guys need to hug now. ahead, is big blue's big come back having its best day in a decade we'll tell you how high it could go i'm melissa lee, you're watching cnbc, first in business worldwide. meantime here's what else is coming up on "fast." grosso is looking at one stock he thinks is a home run. it's already up 100% this ar e mehen "fast money" returns. at fidelity, trades are now just $4.95.
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all across new york state, we're building the new new york. to grow your business with us in new york state, visit esd.ny.gov. welcome back to "fast money. retail stocks soaring today topping the tape check out skechers leading the pack under armour jumping 6 macy's up 4% these bean town stocks are starting to show signs of life can you trust this rebound, tim? >> i think you can again, it comes back to consumption meets valuations there are a handful of these names that actually have balance sheets that are strong, macy's
is one of them the dividend is not going to be cut, it's close to 7%. if you look at a lot of these charts, you have this almost oscillation period, vacillation period, which by definition means you thrash around until you find a base and you're starting to see it and so technically i like where we are more importantly, fundamentally it gets back to whether these companies have overcome the secular challenges facing these companies. >> are these high interest stocks >> they are. the sentiment got way overdone the u.s. wholesale sentiment got ov overblown, these things got way too shorted, too negative. you saw what happened to skechers today you can't be sure of these names, they could rally on any sense of good news too much negativity. >> absolutely. at some point there's value in some of these companies that have great balance sheets like a macys that will turn this around or figure out what's going on. at these levels i think you buy macy's target looks interesting
technically, filling out the long term gap. i would buy those two in this space. >> a lot of have high short interest macy's also has an effective tax rate around 40%. if you look at some of these other ones, under armour has a 37, 38% effective tax rate nike has a very low effective tax rate i think there was rotation coming into the marketplace. there was the tax rate headlines. it was the short interest. is it sustainable? macy's, no way macy's is not a $20 billion worth brand. it has a market cap of 6.5 right now. >> i like to think that, which means i'm holding a $65 stock. i will say this, macy's got thrown around on this nordstrom news on it not necessarily taking itself private. this is not why you own macy's there's real estate optionality. there's company that's generating free cash throw and
has a franchise that's got headwinds. >> fortunately or unfortunately, it's about one store with macy's >> the flagship. >> the flagship. i hate to be consensus but i do believe macy's is the best bet in that space. >> let's switch gears. it's a big night for baseball as the yankee's, aka the bronx bombers, face off against the houston astros in honor of the big game, in lieu of final trades, our traders are bringing you their home run stocks. tim? >> we love puns around here. this is an industrial and an engineering firm, mining, seven times ebitda check this one out >> celgene lost 11 to $12 billion in market cap today, a drug for crohn's disease that they're not furthering trials on, a billion dollars in peak sales. it's a stock i buy aggressively. celgene. >> you want to stick with a name that has done very well.
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